The Great Depression & the New Deal

Crash and Depression

The Stock Market Crash Over-speculation in the stock market  People bought stock “on margin” Put 25% down, borrowed the other 75%  Stock values are over-inflated Market crashes October 29, 1929 – “Black Tuesday”  Prices of stocks start to fall  Everyone tries to sell  Stocks become worthless

Underlying Causes of the Great Depression Agricultural sector still depressed Factories – wage increases didn’t keep up with factory output  So overproduction, under-consumption Big industries struggling  Railroads, steel, textiles, mining Federal Reserve System did not lend out $ Global economic crisis  Hawley-Smoot Tariff

Hoover’s Response Hoover wants the government to step in  But believes in localism, private initiative  Asks businesses to keep people employed  Asks cities to set up help for the poor Boldest move – Reconstruction Finance Corporation  Make loans to banks, state and local governments, businesses  Not enough!

Americans Protest Depression devastates the economy  5500 banks close  Unemployment rate 25%  Farm prices drop by 60%  People blame Hoover – “Hoovervilles” Bonus Army  WWI veterans got a bonus after 20 years – they ask for it now  March on Washington – Hoover puts down the protests

Election of 1932 Herbert Hoover – R Franklin Delano Roosevelt – D  Wants a “new deal” for the American people  No specifics on what that “new deal” will be FDR wins in a landslide

The New Deal Takes Shape

FDR’s Background Relative of Teddy Roosevelt – also wealthy The three R’s:  Relief for the unemployed, recovery for businesses and the economy, reform of economic institutions Brought a “brain trust” to Washington  Closest advisors – hands-on government  Keynesian economics: deficit spending “Priming the pump” First Lady Eleanor Roosevelt  Promoted the New Deal, helped FDR

The Hundred Days Banking Reform:  Emergency Banking Act – lets healthy banks reopens, lets government manage failed banks, sets banking standards  Federal Deposit Insurance Corporation (FDIC) – insures bank deposits up to $5,000

The Hundred Days Relief for struggling Americans  Home Owners Loan Corporation (HOLC) People in cities can refinance their mortgages  Farm Credit Administration Loans to rural Americans  Civilian Conservation Corps (CCC) Jobs to youth  Federal Emergency Relief Act (FERA) $500 million to state and local relief agencies – Harry Hopkins  Public Works Administration (PWA) $3.3 billion for public works projects – to provide jobs

The Hundred Days Agriculture  Tries to reduce production Unpopular when people are starving  Agricultural Adjustment Administration Gave subsidies to farmers in return for production cuts  Supreme Court declares unconstitutional in 1935

The Hundred Days Business  National Recovery Administration (NRA) Brought business leaders together to draft codes of “fair competition” – wages, working conditions Voluntary cooperation Guarantees workers the right to organize, bargain collectively  Securities and Exchange Commission (SEC) Make businesses report accurately on stocks, limit speculation

The Hundred Days The Tennessee Valley Authority  Rural areas in deep poverty  TVA builds hydro-electric dams Employs people Brings them electricity Reduces flooding, soil erosion

Controversy over the New Deal NRA becomes unpopular  Businesses complain, refuse to cooperate  Supreme Court rules it unconstitutional in 1935 AAA does raise crop prices  But hurts sharecroppers, tenant farmers  Dust Bowl in Oklahoma, Kansas Many migrate to California

Challenges to the New Deal From the right:  Conservatives say the N.D. is socialistic  Scared because # of strikes increase Since the Depression isn’t ending  American Liberty League

Challenges to the New Deal From the Left:  Say New Deal doesn’t go far enough  Father Coughlin – radio personality in Detroit, says government should nationalize banks  Francis Townsend – government should give $200 a month to all retired citizens  Huey Long – Governor of Louisiana – “Share Our Wealth” program – tax the rich heavily, give to the poor

Challenges to the New Deal FDR’s Response:  “National Unity” message – like we’re going to war against the Depression  Fireside Chats – he gives weekly radio addresses, talks to people informally  It works – Democrats keep majority in Congress in 1934 elections

The New Deal Changes Course

Extending Federal Relief Works Progress Administration (WPA)  Creates jobs for struggling Americans  Led by Harry Hopkins  Building public works, also writers, artists, etc. National youth Administration (NYA)  Job training for youth, part time work for college students Creates big federal deficit  Keynesian economics

Aiding migrants and unions, regulating business and the wealthy Resettlement Administration  Loans to help tenant farmers buy land, help out people displaced by the dust bowl Rural Electrification Administration  Cheap loans to utility companies to extend electricity National Labor Relations (Wagner) Act  Replaces NRA  Guarantees right to join unions, bargain collectively  Outlaws unfair business practices Higher taxes on the rich

The Social Security Act of 1935 Creates a federal-state system of workers’ pensions  Unemployment insurance  Survivors’ benefits of industrial accidents  Aid for the disabled, mothers with dependent children Federal govt. now responsible for social welfare  Government has a bigger place in peoples’ lives

Election of 1936 and the New Deal Coalition FDR defeats Landon (R) in the biggest landslide since 1820 New Democratic coalition:  Old Democratic supports – white southerners, the west, urban white ethnic voters  New groups: All urban voters Farmers Union members Black voters in the North

The New Deal’s End Stage

FDR and the Supreme Court 1937 Supreme Court:  4 arch-conservatives – hate the New Deal  Struck down NRA, AAA, progressive state laws  FDR worried about Social Security Proposes a bill that would let him appoint an additional S.C. justice for every justice over 70  Trying to ‘pack the court’ with Democrats Public and press react negatively 4 justices retire anyways, court supports N.D.

The Roosevelt Recession Economy dips again in August 1937  Production down, unemployment up  FDR had cut back on programs to cut down the deficit; people had less to spend b/c of new taxes FDR worried about elections, so increases spending again  Economy bounces back (but not all the way)

Final New Deal Measures Farm Security Administration (FSA)  Loans to tenant farmers, relief to migrants Fair Labor Standards Act  Banned child labor  Set a minimum wage, 40 hour work week AAA #2  Govt. can buy surpluses, store them until prices rise – around for decades Conservative Republicans coming into power in Congress

Social Change & Social Action in the 1930s

Psychological & Social Impact Unemployment stays high throughout the 30s – always above 14%  Causes depression, shame of failure Women suffer  Higher unemployment rates, wage discrimination, not unionized Family life changes  Birthrate falls, difficult to raise a family  Education rates up (nowhere else to go), marriage rates down

Industrial Workers Unionize Wagner Act guarantees workers’ right to unionize  John L. Lewis and Sidney Hillman start the Committee for Industrial Organization (CIO) within the AFL For all workers, not just skilled  Steel industry recognizes them, raised wages, 40 hour week  Sit-down strikes at GM GM recognizes the UAW Union membership up to 8 million by 1941

Black and Hispanic Americans African Americans hit hard by the depression  Lower wages, more likely to be fired  Scottsboro Boys  Rising activism – NAACP, boycotts Hispanic farm workers  Discriminated against  Terrible conditions, starvation wages  Unions and strikes start

Native Americans Dawes Act had taken 2/3 of reservation land from Native Americans  Left in poverty with no prospects New organizations fight for reform – John Collier  Builds schools, hospitals, irrigation systems  Indian Reorganization Act of 1934 Stopped sale of tribal lands, recognizes tribes as legal entities